How
Ken Starr tried to prevent state prosecutors from charging his prime
witness with defrauding poor black people of burial insurance.

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PART ONE OF A TWO-PART SERIES

BY MURRAY WAAS | LITTLE ROCK, Ark. --Whitewater
independent counsel Kenneth Starr intervened with Arkansas state
prosecutors on several
occasions between 1994 and 1996 in an attempt to prevent them from
bringing criminal charges against David Hale, then the central witness
in his investigation of President Clinton, according to law enforcement
records and sources.

Starr's pressure on the state
prosecutors culminated during a meeting with them on Sept. 21, 1995,
when one of his senior advisors warned that Starr might even consider
charging the local law enforcement officials with federal witness
intimidation if they proceeded with bringing criminal charges against
Hale, according to three sources familiar with the discussions.

The new information indicates that
even some of Starr's own investigators had privately raised questions
among themselves about the fairness and integrity of Starr's four-year
investigation of the president -- an investigation that led to the
impeachment report sent to Congress Wednesday. The criminal case
against Hale that Starr attempted to derail involved a scam in which
Hale looted funds from an insurance company that sold funeral and
burial insurance to Arkansas residents, mostly poor African-Americans.

The facts in this case, had it been
allowed to proceed to trial in a timely manner, may have further eroded
Hale's credibility as a witness against Clinton, and thereby negatively
affected Starr's entire effort long before the Monica Lewinsky scandal
salvaged the independent counsel's investigation of the Clinton
presidency. As it is, the insurance scam trial of Hale is now finally
scheduled to begin on Oct. 6, far too late to be relevant to Clinton's
predicament now that his presidency has been crippled by the Lewinsky
affair, and his possible impeachment appears imminent.

Starr's previously
undisclosed intervention in the state case was opposed by at least two
FBI agents and a federal prosecutor working for him, who said they
believed that the Whitewater counsel should have taken a neutral
position regarding the returning of any criminal charges against Hale
by the local authorities, according to federal law enforcement
officials.

The career law enforcement
officials working for Starr believed that his intervention was
unjustified, and reflected an inappropriate closeness between Hale and
Starr's top prosecutors that often colored their judgment during the
course of the long Whitewater probe. Starr has often cited the work of
such career law enforcement officers on his staff as evidence that
neither politics nor a personal agenda has played any role in his
investigation, but this case raises new doubts about that claim.

Starr's intervention in the state
case dramatically reversed the position of his predecessor as
Whitewater independent counsel, Robert Fiske, who had advocated a
posture of strict neutrality regarding the probe of Hale by Arkansas
authorities. Starr himself had originally followed Fiske's lead by
taking a position of neutrality, only to later abruptly -- and
mysteriously -- reverse himself in the matter.

His reversal took many of the
career law enforcement officials who were working for him at the time
by surprise, three sources said in interviews. The officials involved
said that they were kept in the dark regarding Starr's reasoning in
reversing his own previous position.

Starr's office also secretly
monitored the progress of the state investigation through a series of
informal contacts with the Little Rock Police Department, which was
conducting the probe of Hale for the state prosecutors, according to
law enforcement documents and sources.

The contacts between the Whitewater
investigators and the Little Rock Police Department are detailed in
dozens of pages of handwritten notes by the police detective who
directed the state investigation of Hale, as well as in contemporaneous
records also kept by two FBI agents working for Starr.

Starr and his senior prosecutors
had about a half dozen meetings with the state prosecutors regarding
the state's potential prosecution of Hale, according to the law
enforcement records and sources. FBI agents working for Starr also had
at least a dozen contacts with a Little Rock police detective to
covertly monitor the activities of the state prosecutors.

Initially, Starr and his top aides
made the contacts with the state prosecutors to discuss how they might
coordinate their various efforts and encourage cooperation between
their respective agencies. Starr at first only requested that Hale not
be arrested by state authorities during a period of time that he was
giving sensitive federal grand jury testimony and also that Starr be
given advance notice of any arrest, four law enforcement officials said
in interviews.

But soon Starr and his top aides
began to question not only the standing of the state prosecutors to
bring any charges against Hale, but also their motivations. Next, Starr
started aggressively pressuring the local law enforcement offices not
to issue any indictment against Hale at all, according to sources and
documents.

Starr also proposed an alternative
to the state prosecutors returning an indictment against Hale by
raising the possibility that Hale's state offenses might be brought up
during a federal sentencing hearing of Hale for his Whitewater crimes.
The state prosecutors rejected Starr's proposal as insufficient, saying
that Hale would almost certainly escape any significant punishment
under the plan -- if he was even punished at all.

On Sept. 21, 1995, during an
impasse in their discussions, Sam Dash, a senior advisor to Starr, told
the state prosecutors that their actions might be construed as federal
witness tampering if they were to bring any indictment of Hale,
according to three law enforcement officials who were present at the
meeting.

Starr did not attend that
particular meeting, though he had been at most of the others with the
state prosecuting attorneys. But three other Whitewater prosecutors,
Bradley E. Lerman, Ray Jahn and Amy St. Eve, as well as three Arkansas
state prosecutors, were present when the witness-tampering issue was
raised, according to the same sources.

The intervention by Starr's office
did in fact intimidate Mark Stodola, then the prosecuting attorney for
Arkansas' sixth judicial district, to some degree and delayed the
bringing of criminal charges against Hale, law enforcement sources
said. The delay may have also significantly weakened the ability of the
state to make its most effective case against Hale, the sources said.

Ultimately, however, the state
prosecutors went ahead and signed an arrest warrant against Hale in
early July 1996. Criminal charges filed by the state prosecutors
charged that Hale had made misrepresentations to the state insurance
commission regarding the solvency of an insurance company that he had
owned, National Savings Life. The prosecutors also alleged in court
papers that Hale had made the misrepresentations to conceal the fact
that he had looted the insurance company.

National Savings Life had marketed
so-called burial insurance to a mostly poor, African-American clientele
residing in the delta surrounding the town of Pine Bluff, Ark. In
exchange for a modest monthly premium, the insurance company paid out a
benefit to a beneficiary's family upon the beneficiary's death, to
cover the costs of a funeral and burial plot. State regulators seized
the firm after they discovered that Hale had looted funds from the
insurance company, and that therefore no funds would be available to
pay for any funerals or burials.

Hale was to stand
trial on the state charges last April, but the case was delayed when
Hale complained of chest pains and entered a local hospital. The trial
was delayed a second time in July when Hale's attorneys filed an appeal
with the state Supreme Court. He is currently scheduled to stand trial
on Oct. 6.

Hale is also currently the subject
of a federal grand jury investigation examining allegations that he
received covert payments of money and other gratuities from
conservative political activists during a period of time that he was a
cooperating witness in Starr's Whitewater investigation. That federal
criminal inquiry is being directed by Michael Shaheen Jr., a former
senior Justice Department official.

Charles G. Bakaly III, a spokesman
for the Whitewater independent counsel, has said Starr and other
prosecutors in his office "followed the letter and spirit of the law"
while consulting with the state authorities. Tona De Mers, an attorney
for Hale, declined to comment. Stodola also said he would have no
comment for this story.

Sources close to Starr say that the
intervention on Hale's behalf was appropriate because they believed
that the state prosecutors were interfering with their own federal
investigation.
They also said they believed the state prosecution to be politically
motivated.

In private
conversations with other Whitewater investigators, Starr and his top
deputy in Arkansas, W. Hickman Ewing III, said they believed that the
state prosecution was done at the behest of allies of then-Arkansas
Gov. Jim Guy Tucker.
Tucker, along with Jim and Susan McDougal, the Clintons' partners in
their failed Whitewater real estate investment, were convicted by a
federal jury in June 1996 on mail fraud and conspiracy charges brought
by Starr's office. Hale was the government's chief witness during that
trial.

Among other things, Starr and Ewing
pointed out that the investigation by state prosecutors originated from
a referral from the Arkansas state insurance commissioner, Lee
Douglass, who had first been appointed by then-Gov. Clinton and was
later reappointed by Tucker. Douglass has said that his office stumbled
upon the fraud at Hale's insurance company while conducting a routine
audit, and that when the fraud was discovered, he had no other choice
but to notify the appropriate law enforcement authorities.

Despite an exhaustive
investigation, Starr's office was unable to find any evidence of any
role by Tucker or any of his political allies to attempt to influence
the state prosecutors, according to federal law enforcement officials.
Tucker himself became a cooperating witness in Starr's investigation in
February 1998 and confirmed that he had had no contacts with the state
prosecutors regarding Hale, according to federal law enforcement
officials.

In a telephone interview, Tucker
repeated his denials that he had had any role in the state case: "My
policy was to stay as far away from the insurance investigation as
possible ... I had a man [Hale] who was making allegations against me
while someone who I had appointed was recommending actions against
Hale," Tucker said. "I didn't want to be seen in any way to be impeding
any investigation."

And a federal judge also
subsequently found no evidence of any wrongdoing by the state
prosecutors in their decision to charge Hale. The judge's ruling was in
response to a civil lawsuit Hale filed against the state prosecutors
alleging that their prosecution of him was politically motivated and
thus denied him his due process under the law. Hale sought to have the
federal court enjoin the state prosecution, a request that was turned
down in especially harsh language by Federal District Court Judge
George Howard Jr., who presided over the case.

"After a thorough review of the
record, the Court cannot find that the criminal prosecution against
Hale was instituted for any impermissible purpose," Judge Howard wrote
in his March 4, 1998, ruling. "The charges were brought after a
thorough investigation. There is no evidence, either direct or by
inference, that the prosecution is motivated to harass or punish Hale
for cooperating with the federal government, or was brought because of
some political agenda on the part of the Prosecutor ... The evidence
reveals that the State has a very valid and legitimate reason to
prosecute Hale for violation of state law."

Howard also ruled that Hale's
allegations were "fraught with innuendo and speculation." He went on to
rule: "Hale implies that a conspiracy exists involving Stodola and
other persons out to retaliate against him for cooperating with the
Independent Counsel. There is absolutely no evidence that any of the
entities or individuals identified by Hale ever even talked to Stodola
about Hale, let alone tried to influence the decision to prosecute."

The state case
against Hale began after state regulators discovered during a routine
audit that Hale's insurance company, National Savings Life, was
insolvent. On Sept. 27, 1993, Lee Douglass, the state insurance
commissioner, seized National Savings Life, saying the firm was
"technically insolvent and needed to be placed in a rehabilitation
posture for the protection of its policyholders."

Just four days before Hale's
insurance company was seized by the state regulators, a federal grand
jury in Little Rock had also indicted Hale on four felony counts that
he had defrauded the federal Small Business Administration of more than
$3.4 million. Hale later pleaded guilty to two felonies, admitting that
he had committed the fraud through Capital Management Services, a
federally subsidized lending company that Hale also headed at the time.

The state
investigation of National Savings Life and the federal investigation of
CMS were unrelated, according to several law enforcement officials.
CMS's mandate was to provide federal funds and private capital to
minority and disadvantaged businesses, but the federal investigation
found that Hale misappropriated monies from the SBA program for
himself, and that he made fraudulent and illegal loans to a number of
Arkansas political and business leaders.

Hale was facing that federal
indictment when he first made allegations of criminal wrongdoing
against President Clinton. Hale alleged that in 1986 then-Gov. Clinton
pressured Hale to have CMS make a fraudulent $300,000 loan to Susan
McDougal, one of the Clintons' partners in their failed Whitewater land
investment.

In defending their
actions, state officials point out that their investigation of Hale's
National Savings Life preceded the time when Hale first started making
his charges against Clinton and Tucker, and thus they could not
possibly have undertaken their probe as retaliation for his charges
against the two popular Arkansas political figures. State records show
that the audit and review of National Savings began in August 1993,
several months before state officials could even have learned of Hale's
charges against Clinton and Tucker.

The state
regulators then referred the matter for potential criminal action to
the prosecuting attorney for Arkansas' sixth judicial district during
early summer 1994, according to court records. The state regulators and
law enforcement officials said their actions were exactly what was
required by law.

Almost from the inception of the
state probe of Hale, Starr's office took an intense interest in the
case, according to law enforcement sources and records. Initially,
Fiske, Starr's predecessor as Whitewater independent counsel, and Starr
simply monitored the state investigation and took no position at all
regarding any local charges against Hale, according to law enforcement
records and sources.

Then, for reasons that are not
known, Starr and his top Arkansas deputy, Ewing, abruptly reversed
their own position in the summer or fall of 1995. In doing so, Starr
and Ewing were also overruling the concerns of FBI agents assigned to
the Whitewater investigation who thought Starr should not interfere
with the state probe.

Starr and Ewing
then began making demands to the state prosecutors that they not go
forward with any criminal charges against Hale, according to the law
enforcement records and sources.

Federal Whitewater investigators
say they were not consulted concerning the abrupt shift of positions by
Starr and Ewing: "There has generally been a very deliberative and
corroborative atmosphere around here," recalled one of the federal
investigators. "Everybody is asked for their input, from the youngest,
most inexperienced legal assistant on up ... There was none of that
type of discussion on this one."

The pressure on the state
prosecutors culminated in the Sept. 21, 1995, meeting, when Starr's
senior advisor, Sam Dash, told three of the state prosecutors during a
meeting held at the offices of the independent counsel that if the
local law enforcement officials were going to proceed with an
indictment of Hale, they could in turn find themselves facing federal
witness tampering charges.

Ultimately,
however, the Arkansas state prosecutors disregarded this threat and
filed both arrest warrants and a "criminal information" (the equivalent
of an indictment) against Hale. On Feb. 13, 1996, Stodola defiantly
wrote Starr that his office intended to prosecute Hale, notwithstanding
the Whitewater independent counsel's wishes:

"We have completed our ...
investigation of David Hale and have decided to charge him with
violating Arkansas law. Mr. Hale not only committed multiple crimes
against the federal government, but there is also probable cause to
believe he has independently violated state law as well ...

"In the final analysis, it is
ultimately a decision for the prosecutor, either state or federal, to
determine how best to protect society's interest in bringing wrongdoers
to justice. In the case at the bar, David Hale should be held to answer
for what he has done."
SALON | Sept. 10, 1998

Also contributing
reporting to this story was George Wells, a freelance writer who had
covered the federal courts for more than a decade for the Arkansas
Gazette. Research assistance by Nat Parry and Deidre Hussey.